After a solid finish to 2024, the U.S. consumer rested up in January. Spending fell 0.2% over the month, coming in short of already-temperate expectations. The drop in spending was concentrated among goods (-1.2%) after we suspect some purchases were pulled forward at the end of last year. Services spending continued to advance, albeit by the slowest pace since June of last year. Notably, the pullback in spending did not come from a squeeze on income last month. Household income popped by 0.9% at the start of the year. Some of the gain looks due to the usual one-off adjustments at the start of the year, such as cost-of-living adjustments that boosted income from government benefits by 1.8%. Rental income and asset income also rose over 1% last month. Yet, wages & salaries, the driver of the typical household's spending, rose a respectable 0.4% in January.
A reversal of January's soft spending in the near term does not look assured with consumers feeling down of late. The February Consumer Confidence survey echoed the growing pessimism of the separately reported sentiment survey published by the University of Michigan last week. Consumer Confidence posted its largest single-month drop in February since 2021 to land at an eight-month low. The dizzying rate of policy announcements appears to have jarred consumers, with the survey noting "comments on the current Administration and its policies dominated the responses." Talk of tariffs in particular seems to be worrying consumers with inflation uncomfortably high. Like in the Consumer Sentiment survey released last week, expectations for inflation over the next 12 months catapulted to levels unseen in more than a year.
While consumers continue to fret about the future of inflation, the latest reading from the PCE price index showed price growth has continued to gradually cool on trend. Both headline and core PCE price growth picked up over the month of January, but eased on a year-ago basis. The core PCE index slipped to 2.6% year-over-year, matching the cycle-low registered last June. Yet, we anticipate little to no further progress by this measure in the coming months. Signs of a reversal in goods deflation are under way even ahead of the announcement of additional tariffs on Chinese goods, which stand to offset the ongoing slowdown in services inflation. When measured on a 12-month basis, the PCE index for core goods prices posted its first increase since late 2023 in January, while housing and non-housing services inflation registered the smallest increases in more than three years.
This Week's State Of The Economy - What Is Ahead? - 01 November 2024
Wells Fargo Economics & Financial Report / Nov 06, 2024
The unemployment rate, which is derived from the household survey and counts those not working due to a strike or severe weather as employed, held steady at 4.1%. A 25 bps rate cut at next week\'s FOMC meeting remains highly likely.
This Week's State Of The Economy - What Is Ahead? - 10 November 2020
Wells Fargo Economics & Financial Report / Nov 17, 2020
The U.S. election has come and gone, but we have not made any meaningful changes to our economic outlook, which continues to look for further expansion in the U.S. economy in coming quarters.
This Week's State Of The Economy - What Is Ahead? - 09 April 2021
Wells Fargo Economics & Financial Report / Apr 10, 2021
This week\'s economic data kicked of with a bang. The ISM Services Index jumped more than eight points to 63.7, signaling the fastest pace of expansion in the index\'s 24-year history.
This Week's State Of The Economy - What Is Ahead? - 13 October 2023
Wells Fargo Economics & Financial Report / Oct 13, 2023
The Consumer Price Index (CPI) rose 0.4% in September, a monthly change that was a bit softer than the 0.6% increase registered in August. The core CPI rose 0.3% during the month, a pace unchanged from the month prior.
This Week's State Of The Economy - What Is Ahead? - 21 October 2022
Wells Fargo Economics & Financial Report / Oct 25, 2022
The real estate sector has been significantly affected by rising interest rates, with total housing starts falling 8.1% in September. Peering ahead, the forward-looking Leading Economic Index points to a recession in the coming year.
This Week's State Of The Economy - What Is Ahead? - 31 January 2020
Wells Fargo Economics & Financial Report / Feb 01, 2020
Mexico’s economy has slowed notably over the last year, with the economy contracting again in Q4, indicating a full-year contraction for 2019.
This Week's State Of The Economy - What Is Ahead? - 30 October 2020
Wells Fargo Economics & Financial Report / Oct 27, 2020
Real GDP jumped a record 33.1% during Q3, beating expectations. A 40.7% surge in consumer spending drove the gain.
This Week's State Of The Economy - What Is Ahead? - 20 January 2023
Wells Fargo Economics & Financial Report / Jan 20, 2023
The housing sector has borne the brunt of the Fed\'s efforts to slow the economy, and this week\'s data showed the industry continues to reel.
This Week's State Of The Economy - What Is Ahead? - 06 January 2023
Wells Fargo Economics & Financial Report / Jan 12, 2023
During December, payrolls rose by 223K while the unemployment rate fell to 3.5% and average hourly earnings eased 0.3%. Job openings (JOLTS) edged down to 10.46 million in November.
This Week's State Of The Economy - What Is Ahead? - 23 August 2024
Wells Fargo Economics & Financial Report / Aug 29, 2024
Home sales also have been slow to respond. Existing home sales inched up during July alongside a modest dip in mortgage rates.
